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Complexity Grows for Home Purchase Lending and Closings

As result of the Dodd-Frank Act, significant regulatory changes become effective August 1, 2015. These new rules will greatly affect the home lending and sales markets in how residential first mortgage loans are presented, processed and closed. Lenders, title companies and real estate brokerage firms will bear the burden in implementation. Consumers will allegedly receive greater protection through improved disclosure and simplification of the closing process.

Of course, the proof will be in the pudding, but one thing is certain: it will not be business as usual after the 1st. All the new requirements are beyond the scope of this post, but some advanced planning and preparation is well warranted given the breadth of change. More details can be found here. Some documentation such as the Good-Faith Estimate and the HUD-1 Settlement Statement will cease to be valid. In place of these forms, new and more integrated forms will be used along with new timing requirements, pre-disclosures, tolerances in disclosed estimates and record retention periods.  There are some exemptions which include home equity loans, land contracts and cash closings among others.

Current closing realities often include last minute changes to the loan or other aspects of the closing documentation.  But with the newly required Closing Disclosure and the newly required subsequent 3 day waiting period (after presentation to the borrower) before actually closing, many typical last minute changes will likely trigger a required revision in this form; thus, a reset in the waiting period for another 3 days. Without proper planning and organization with adaptable contractual provisions, such unanticipated delays could wreak havoc on a transaction, not to mention the creation of undesired legal ramifications.

The takeaway? The Boy Scout motto: Be Prepared.

Note: The views expressed are solely the opinion of the author.
Image source: By U.S. Government [Public domain], via Wikimedia Commons

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